Outsourcing goes rural

The most exciting ferment to stir up rural India after Amul cheese has been business process outsourcing (BPO). Wednesday's feature in this paper on rural BPOs paints a picture of a dynamic segment of the fast-growing BPO industry, slated to scale up to 1,000 centres employing 1,50,000 people, from the 50 centres employing 5,000 people now. What drives this scorching pace of growth is the self-same combination of enabling technology and cost arbitrage that created the BPO industry in the first place.

After high costs — rents, wages, attrition — forced BPOs to look at tier-II towns, a few of the more enterprising among them started setting up centres in rural areas, where all costs are significantly lower. Skills are available in smaller concentrations at each location, but technology can allow many such small locations to be coordinated to create virtual large centres, at a fraction of the traditional cost. Hundreds of thousands of rural youth would find organised sector work, even larger numbers of indirect jobs would be created.

To begin with, simple activities such as data entry, data and bill processing, and document verification can be entrusted to those who have completed high school. Labour costs are just about half (` 4,000-4 ,500 per month) of what would have to be paid for the same job in an urban centre. Freed of some routine tasks that can be handled by the rural centres, BPO companies can then focus on higher-value work, leveraging the analytical and processing skills of urban employees.

Cost advantage is not enough to encourage companies to venture into smaller towns or semi-rural areas. For the rural BPOs to effectively function as spokes of a hub in an urban centre, high-speed data connectivity and power supply will be critical. Incentives provided by state governments too can accelerate the process. Karnataka, for instance, gives 50% rebate on internet connections and 10,000 per candidate to the entrepreneur who plans to set up a rural centre. Tamil Nadu may follow suit. More significant, however, would be infrastructure inputs.